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U.S. Centralizes Debt Collection : New Software Will Streamline System for Overdue Bills

June 28, 1989|ALAN J. WAX | Newsday

SILVER SPRING, Md. — Collecting delinquent debts has never been easy for the federal government.

Its myriad agencies, which have more than $32 billion in overdue debts, excluding taxes, according to an Office of Management and Budget estimate, have seen their overdue bills thrust into the labyrinth of a justice system that is spread over 94 U.S. attorneys' offices, usually to end up in file boxes in some hallway or closet.

In the past, each agency was required to send its cases to the appropriate U.S. attorney's office, and lawsuits had to be filed in the various state courts, each of which operates under different laws and rules. But since the passage of the Debt Recovery Act of 1986, the Department of Justice has begun to take steps to centralize the process and hire private attorneys to collect the government's overdue bills.

In April, 1988, Silver Spring, Md.-based Data Transformation Corp., a Department of Justice contractor, selected a computer software package developed by Attorney's Data Systems Inc., a subsidiary of Jericho, N.Y.-based Legal Software Solutions Inc., to enable it to centralize, screen and automate the process of suing Uncle Sam's deadbeats.

Funding Development

The software allows attorneys to control how each case proceeds and automatically generates forms, letters, legal documents and accounting reports. Cases will be shipped electronically from Data Transformation's site, called a central intake facility, to either a U.S. attorney's office or one of four private attorneys in each federal court district. The program is up and running in six states.

The government also will be funding development of state variations of the program, called EasyCollect, tailored to each state.

That becomes a major potential market for Attorney's Data, which will be able to sell the program to states, municipalities, private institutions and law firms.

"This market is arguably quite large," said Peter Fleischman, 37, who joined Attorney's Data as president about two months ago. Already, Denver has become a customer and inquiries have been received from officials in New York and Texas.

Competition is minimal. Most debt-collection programs are little more than accounting programs, said Data Transformation's Arthur Sachs.

David Hambouger, director of the American Bar Assn.'s Legal Technology Resource Center in Chicago, who said he was unfamiliar with EasyCollect, noted that only two debt-collection programs are undergoing ABA testing.

EasyCollect has not been submitted to the ABA, according to Fleischman, because it is not geared to small law practices. And Robert N. Ford, deputy assistant attorney general of the Department of Justice's Debt Collection Management division said he is not bothered by EasyCollect's lack of ABA approval.

Customized Package

About 75 law firms have purchased EasyCollect systems over the 10 years since the company's founding by Legal Software president Jack Castro, who left a job as data processing manager at Central Adjustment Bureau, a Long Island collection agency, to form Attorney's Data. Castro began to develop the software as part of an effort to help IBM tap into the legal automation market. EasyCollect is designed to run on IBM Series 36 computers.

The software was originally a highly customized, $30,000 package sold in conjunction with $50,000 of IBM hardware. Attorney's Data Systems' claims dozens of law firms and Chase Manhattan Bank among its customers.

But to really reach this market, the company realized that it would need to develop a standardized product, said Fleischman. "We need to be a household name," he added.

Today, Castro, 42, is president of publicly traded Legal Software Solutions Inc., a one-time blind pool penny stock known as Excelsior Corp. that merged in March, 1987, with Attorney's Data. Stanley Altshuler, a one-time stockbroker whose license was lifted by regulators for securities law violations, was instrumental in the merger and served briefly as a company officer. The company's stock, traded on the NASDAQ over-the-counter market, recently was quoted at a bid price of around 66 cents a share.

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